Page Litton likes to use her credit card to buy gas since she can defe

Page Litton likes to use her credit card to buy gas since she can defer payment for 30 days. However, she notices that her dealer charges 3 cents more per gallon than if she paid with cash. Page estimates paying about $1.

00 a gallon for gas, and her monthly credit statement shows an APR of 18 %. Given this information, Page should
A)

continue using her card since the opportunity cost of paying in cash is less than 18% a year.
B)

pay with cash since its opportunity cost is about 36% a year.
C)

continue using her card, the effective cost of using cash is about 36% a year.
D)

you can’t tell unless you know how much gas she will buy.

ANSWER

B